Article on Vendor Compliance Management SOP-111

What is Vendor Compliance?
Mandatory rules, contractual obligations, policies, activities, events or any other formal communication put forward by OEMs/Vendors that shall be adhered in totality in a periodic manner by the appointed distributor. Vendor compliance might get typically complex for large organizations with a variety of vendor requirements. Compliance with a set of vendor requirements may certainly improve the relationship while non-compliance might worsen the relationship leading to the eventual termination of the contract.

Sources of Vendor Compliance
Set of compliance requirements for a vendor emanates from the following sources.
  • Contract signed between OEM and distributor
  • Circulars from OEM
  • Supplier meets
  • Conventional practice (Nothing would be said in the contract but compliance would be followed as a convention)
Non-compliance Risks
The degree of risk of non-compliance is directly proportional to the amount of deviation from the compliance set by the OEM. Typical risks of non-compliance are
  • Penalties or fines
  • Displeasure note
  • Downgrading of partner status (from gold to silver partner)
  • Reduction of product portfolio
  • Liquidated damages
  • Legal cases
  • Withdrawal of Marketing Development Fund (MDF)
  • Termination of contract
  • Loss of reputation with OEM
Vendor Compliance Management System
It is a software where all the compliance requirements of an organization are uploaded vendor wise so as to alert the concerned  Business Manager to take appropriate action in a timely manner. By computerizing the entire compliance management, organization drastically reduce the risks of its non-compliance.

Features of Vendor Compliance Management System
A Vendor compliance management system has the following features.
  • A vendor wise dashboard to monitor the compliance activity
  • Alert the concerned Business Manager in time to fulfill the compliance activity
  • Escalate the non-compliance internally to the management
  • Automate the generation of compliance reports
  • Act as a repository for the list of compliances
  • Generate non-conformance report
Benefits of Vendor Compliance Management System
A vendor compliance management system benefits the organization in the following ways.
  • Timely information of compliance is available to Business Managers.
  • Management have a visibility on the compliance levels.
  • Competitive advantage to distributing organization.
  • Significant time savings.

Written by Ragul Gowtham E

Ragul Gowtham is a Production Engineer with 5 years of experience in spare parts distribution. An APICS Certified Supply Chain Professional with profound knowledge in end-to-end supply chain. He is also teaching various supply chain certifications.

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